On Tuesday, the crypto market continued testing new support levels after a rally overnight pushed prices over $52,000 as the tiny Latin American nation adopted bitcoin as legal tender, maintaining its bullish momentum.
As El Salvador becomes the first country in its 12-year history to accept bitcoin as legal tender on Tuesday, bitcoin is experiencing the biggest test in its 12-year history.
Both enthusiasts and detractors of crypto will be monitoring the experiment to see if a significant number of people want to transact with Bitcoin when it circulates alongside the U.S. dollar, and whether it brings any benefits to the violent, impoverished Central American nation.
Currently, the market value of approximately 400 bitcoins purchased by the country is about $20 million. Following the purchase of the first batch of 200, President Nayib Bukele stated via Twitter that “a lot more” will be purchased.
It is likely that other countries will follow El Salvador’s example if the experiment is successful. Chivo, the government’s Bitcoin wallet, will provide an initial boost to adoption by allowing users to purchase $30 worth of the currency per registration with a Salvadoran national ID number.
In addition to Bitcoin ATMs, the country’s government has installed 200 machines where U.S. dollars can be exchanged for Bitcoins. Bandesal, owned by the State Bank of El Salvador, created a $150 million fund to support the transactions.
Public accounting will continue to use the U.S dollar, and traders unable to receive e-currencies will be exempted from the law, the government says.
The International Monetary Fund has warned that using bitcoin may be dangerous since it lost nearly half its value between April and May. World Bank declined the request by El Salvador to help the government adopt it, citing environmental and transparency drawbacks. El Salvador’s dollar bonds were also hit by the bitcoin news, though they have since pared losses.
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